Human Resource Blog

Exempt Employees Pay Reduction

We are looking at reducing exempt employees salaries. Can we so this in the middle of a pay period and what notice, if any, do we need to give.

This will depend partly upon which state you are in. Under federal law and in most states, a salary reduction cannot be retroactive, so the employee must be aware of the reduction at least one day before it takes effect. You can tell exempt employees that their salary will be reduced beginning tomorrow. You cannot tell them that their salaries were reduced two weeks ago.

You can change salaries in the middle of the payroll week, but processing payroll will be far easier if you make the salary reduction coincide with the beginning of a payroll period.

The best practice in HR is to give employees at least one full pay periods notice that their wages will change. In other words, you would let employees know at the beginning of a pay period, that effective with the beginning of the next pay period, their wages would change. But again, check the law in your state — some states require more notice.